My firm prepares a quarterly newsletter to all clients to keep them up-to-date on tax matters.
Below is an excerpt from our Update for January 2020.
CHANGES TO IRS FORM 1040 FOR 2019
The 2018 version of IRS Form 1040 required up to 6 additional forms (Schedules 1 through 6) to be attached to the basic Form 1040. For 2019, IRS has condensed that to 3 additional forms (Schedules 1 through 3). Although this may seem that IRS is asking for less information that is not the case. They just consolidated 6 forms into 3.
Another change is the addition of IRS Form 1040-SR, U.S. Tax Return for Seniors, which is almost the same as Form 1040 but has larger print.
As for the “alphabet soup” of additional forms, they remain the same.
TAX CHANGES TO RETIREMENT PLANS
Included in the recently passed and signed Federal appropriation act (which funds the government through September 30, 2020) are changes to the rules for retirement plans (including IRAs). In summary:
The age by which required minimum distributions must be made has been changed to 72 (formerly 70 ½).
The age limit for making contributions to IRAs of 70 ½ has been eliminated; IRA contributions can be made by taxpayers regardless of age.
IRAs inherited by a beneficiary who was not the spouse of the account holder are now required to be distributed over 10 years (formerly 5 years).
Long-term part-time employees can now participate in their employer’s 401(k) plan.
If you’re affected by these changes you may want to ask your tax professional what, if anything, you can do to take advantage of them.
CONGRESS FINALLY GETS AROUND TO EXTENDING EXPIRED TAX PROVISIONS
Yes, I’m aware that Congress has been busy doing…whatever they’re actually doing. But several provisions in the tax law that expired at the end of 2017 have been retroactively reinstated.
Among the reinstated provisions are:
The exclusion from income of cancellation of qualified principal residence indebtedness (cancellation of an unpaid mortgage) has been reinstated and extended through the end of 2020.
The deduction for tuition and fees for college has been reinstated and extended through the end of 2020.
The itemized deduction for mortgage insurance premiums has been reinstated and extended through the end of 2020.
Various other provisions have also been reinstated and extended through the end of 2020, many of which are favorable to business investments.
The extended provisions that affected individuals will require taxpayers to file amended returns for 2018 and 2019. Ask your tax professional if you can file amended returns to take advantage of these provisions.
CHECKING YOUR TAX PAPERS FOR CORRECTNESS
Now that the New Year is here you should start receiving various tax forms and information. Rather than bring them to your tax appointment unopened it’s a good idea to open the envelopes and check to see that all information is correct. If there are any errors, the sooner you can contact the sender to get them corrected (and the sooner you can get your tax returns filed).